Willis Reports Record Q3, Nine Month Earnings

Willis Group Holdings Limited reported record results for the third quarter and nine months ended September 30, 2003, posting net income for the quarter of $99 million, or $0.59 per diluted share compared to $31 million, or $0.19 per diluted share, a year ago.

Willis’ net income for the nine months ended September 30, 2003 was $296 million, or $1.75 per diluted share, compared to $92 million, or $0.57 per diluted share, in first nine months of 2002.

“Excluding non-cash compensation for performance-based stock options, a related one-time tax benefit arising from a change in UK tax legislation, and net gain or loss on disposal of operations, adjusted net income increased 35% to $62 million for the quarter ended September 30, 2003 from $46 million in the same period last year,” said the bulletin. “Adjusted net income per diluted share rose 32% to $0.37 for the third quarter of 2003 from $0.28 a year ago.”

Nine month figures showed that “adjusted net income increased 42% to $267 million from $188 million in the first nine months of 2002, while adjusted net income per diluted share rose 40% to $1.58 for the nine months ended September 30, 2003 from $1.13 in the first nine months of 2002.”

Willis reported that total Q3 revenues “increased 16% to $452 million, from $390 million for the same period last year. Of this 16% increase in reported revenues, approximately 2% represented the effect of foreign currency exchange rate movements and approximately (2)% was attributable to the effect of acquisitions and disposals. Adjusting for these items, organic revenue growth was also 16% in the third quarter of 2003. The adjusted operating margin was 23% for the third quarter 2003 compared with 21% for the same period last year.”

Nine-month figures show total revenues up 20 percent to $1.499 billion, compared to $1.252 billion for the corresponding period in 2002. “Of this 20% increase in reported revenues, approximately 5% represented the effect of foreign currency exchange rate movements and approximately (2)% was attributable to the effect of acquisitions and disposals. Adjusting for these items, organic revenue growth was 17% in the first nine months of 2003. The adjusted operating margin was 29% through the nine months ended September 30, 2003, compared with 27% for the same period last year,” said the announcement.

Chairman and CEO Joe Plumeri said in a written statement, “I am pleased to report another strong financial performance. Our quarterly results are reflective of our core strategy to grow revenues consistently, recruit great people, maintain expense discipline and expand margins. In doing so, we are building a great business – one that will perform well in all market environments.”

He indicated that the “Willis model”, which he defined as delivering “global resources locally to the client regardless of their geography in a client-focused, creative, entrepreneurial way,” is being validated. “The role of our client advocates, working as a single team on behalf of our clients, is even more valuable in today’s business environment, as we seek innovative ways to identify and mitigate risk for our clients,” he continued.

Willis did well on the other side of the ledger as well, reducing its long-term debt by 32 percent to $448 million from $658 million a year ago. Total stockholders’ equity at quarter’s end was around $1.15 billion. The announcement also indicated that Willis has approximately $160 million of immediately available cash, and noted that Standard & Poor’s had recently raised the counterparty credit rating on the Company to investment grade.

“We are very proud to have earned an investment grade rating on debt within five years of the leveraged buyout, and just a little over two years since the initial public offering of common stock,” Plumeri commented. “We declared an initial common dividend in February 2003, increased the dividend rate in July 2003, and the S&P upgrade represents yet another milestone as we continue to strengthen the fundamental performance of the Company.”

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